Bosses Who Volunteer For Pay Cuts
Jay Leno's Haircut: Rare But Not Unique
Sept. 11, 2012 -- intro: When a company cuts pay, how often does the boss take the same hit as everybody else? How often does he or she volunteer for it, in a gesture of solidarity?
Jay Leno, top dog of NBC's "Tonight Show," recently took a 50 percent pay cut, as reported in the Wall Street Journal and confirmed by NBC executives. Leno's representatives said the funnyman had done it voluntarily, to help reduce layoffs from the show's staff, following a reduction in its budget.
Leno's not alone. Other bosses in tough times have stepped forward to take a financial hit, in the belief that if everybody else has to get less, they should, too. Others have penalized themselves for having made mistakes that cost their co-workers.
Brian Foley, an executive compensation consultant in White Plains, N.Y., says, "Voluntary pay cuts do happen at the CEO level among the big boys. Every once in a great while, but less often than a blue moon."
What happens later, after the boss's sacrifice, he says, bears watching: "The thing you want to watch for is the size of the bounce-back that happens later, when CEO pay levels are 'restored.'" He points to the example of Citigroup boss Vikram Pandit, whose compensation leapt back up in 2011, according to company proxy statements, following what Foley calls "ultra lean" pay for 2009-2010.
Here's more about Jay Leno and 5 more bosses who took hits—some voluntarily, some not.
quicklist:title: Jay Leno, head of NBC's "Tonight Show"text: Compensation expert Brian Foley says that if Leno's cut was both voluntary and as big as reported, then it really does count as more than a small gesture. "That's real money, particularly if it extends for more than a year. It would have effectively absorbed about 75 percent of the total reported $20 million budget cut for the show." Leno's sacrifice, however, seems not to have buffed his halo in the eyes of the public: When Entertainment Weekly magazine polled readers about it, 43 percent said Leno deserved credit for taking one for the team. But 57 percent said not, because he was still making $15 million.media:17204367
quicklist:title: Dan Hesse, head of Sprint Nexteltext:Hesse announced in May that he was cutting his own pay by $3.25 million, following shareholder complaints about how his compensation had been calculated, according to the Associated Press. The calculation, contrary to Sprint's own guidelines, excluded high costs the company had incurred for the right to sell Apple's iPhone. In a statement, Sprint's chairman said that the company applauded Hesse "for his willingness to sacrifice personal compensation in order to reduce any distraction that could negatively affect morale."media: 17204319
quicklist:title: John Mackey, head of Whole Foodstext:Mackey, according to a regulatory filing, voluntarily cut his own pay by two thirds in 2008, following a tough year where Whole Foods profits slid 10 percent and shares fall almost 18 percent. The Associated Press called it a tumultuous period the company's history, when shareholders had tried to split the jobs of chairman and CEO, both of which Mackey held.media:17204120
quicklist:title: Steve Odland, former head of Office Depottext:Odland's haircut of 65 percent in pay followed a year in which Office Depot posted a loss of nearly $1.5 billion, announced it would have to cut 2,200 jobs, and said it would have to close about 9 percent of its stores, all in response to a fall-off in consumer spending, according to company proxy statements. Odland received no bonus. He resigned in 2010.media:17204106
quicklist:title:Jim Skinner, head of MacDonald'stext:No matter that MacDonald's share price rose 33 percent in 2011, said the Associated Press; and no matter that the company posted gains in sales. It still cut the pay of CEO Jim Skinner 10 percent to $8.8 million. Why? Although some of the components of Skinner's total compensation increased in value, such as his free use of company aircraft, his cash compensation fell. It dropped 27 percent to $3.3 million, the casualty of a complex corporate metrics.media:17204094
qucklist:title: Randall Stephenson, head of AT&Ttext:AT&T said in a 2012 regulatory filing that it docked the pay of CEO Stephenson for his having bungled (not their exact word) a deal in which the shrunken telegraphy behemoth had sought to acquire T-Mobile. The failed overture cost AT&T $4.2 billion in cash and spectrum rights, which, according to the AP, it had to pay T-Mobile in compensation for the failed deal. AT&T's board, contemplating the bust, cut Stephenson's pay by more than $2 million.media: 17204168
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